Schiff Update, Tuesday, April 7, 2020, 4:15 PM

Good afternoon Schiff Clients!

I hope each of you and your families and employees are safe!

We are here for you!

We are receiving a lot of questions from clients about how to apply and when to apply for a Paycheck Protection Program Loan (PPP Loan Application Process). Each Financial Institution is different. Each Bank is requesting different financial documentation. There is no coordination from the SBA nor the US Treasury. So, we are all dependent on your Bank.

We understand this is the most critical question every dental practice has. If you receive the PPP Loan before it is needed, what can you do , what should you do?

I wanted to share my firm’s thought process with you , so we can help you make the best decision for your practice. You have to make this business decision as soon as possible, which is why we are suggesting you read through the options and worst-case scenarios we have listed below. There is no correct / wrong answer to this decision. What matters is, what is best for you and your practice.  Unfortunately , the outcome is based on factors outside your control. For example,  when the ADA and the various State Boards inform us we you can reopen. Since we cannot control any of these factors, each of you will need to make a decision that you feel is best for you and your practice.

As I see it, here are your Options:

  1. Apply today for a PPP loan, possibly get the funds as soon as possible, and spend the PPP during the next 8 weeks of receiving the funds. That’s great, but if the PPP Loan Origination date is let’s say is 4/13/20,  you will need to spend the PPP Loan by 6/08/20, or the 8 weeks window will have expired. I need to check with the ADA and the SBA, to see if the SBA and the U S Treasury , will allow us to pull the PPP Funds down now, and hold them until we all go back to work. I am not putting a lot of confidence in this happening. I hav ebeen in touch with the ADA through this process….Geeze!
  2. Apply now for a PPP loan, have the origination date delayed, if you can. Some banks say they can allow this; however, many banks are saying they cannot delay funding. Unfortunately, this is simply another factor that is outside your control as there is no consistency. Banks are learning as they go as to what options they can offer. I would certainly get a definitive answer from your bank on this point. One of our clients received an e-mail from PNC today, and they are saying “No, you can’t delay.  Once the application is approved the funding is done right after that”…..another Geeze!
  3. Wait to apply for a PPP loan, apply when you are about to reopen. This is the ideal situation, but the risk is the funds could run out. Yesterday, Wells Fargo annouced their funds ran out. There is  $349 billion in funds available for this program, but they could run out. No one knows if the funds will last or if they will be replenished. If you wait and don’t get a PPP loan, the consolation prize is you might be eligible for a credit 50% of wages paid in Q2, up to $5,000 per employee. The details of that are complicated though.You cannot obtain a PPP Loan and receive the Payroll Tax Credit, it is an either or.
  4. Other Financial issues surrounding the PPP Loan process and its timing
    1. You will be paying employees not to work at some point during that 8 week
    2. It may be possible that with the state and federal unemployment (additional $600 per week on top of state unemployment), your team could be earning more money on unemployment. So, by you deciding to pay them now, in effect reemploying them, they could start making less money than if they stay on unemployment….another Geeze!

Additional Information

We were just informed from the ADA, “Mnuchin just said at the White House small business briefing that he looks forward to the House passing the $250 billion pension package on Friday (Aprl10th) after the Senate passes it on Thursday (April 9th).  We’re still waiting to hear whether Schumer will object in the Senate on Thursday”.

Worst-case scenarios:

  1. You get the funds in a week or so, you spend the funds on eligible costs during the 8-week forgiveness period that ends in June, and you need to pay employees at the end of June even if you are not open. Your cost is the expense in those weeks after the loan runs out but at least you built some goodwill with your employees, unless they are getting unemployment and it is higher than what you pay them.
  2. You get funds, keep employees on unemployment, and don’t use the majority of the funds until after the 8 weeks. You end up with a loan that has 1% interest for 2 years to pay wages when you reopen. Not free money, but cheap working capital and, if you can’t reopen for some time, this working capital is probably necessary.
  3. You wait for the loan and it isn’t available when you need it. You may have to look for alternative financing

None of those scenarios are terrible – they just aren’t as ideal as having 8 weeks of payroll covered. Again, the factors are out of our control, so we don’t have an answer. I know some consultants say wait as the money will be replenished if it runs out. This is fair, but we don’t really know if that will happen. Others say apply now and don’t wait. Also, fair, but you might be paying employees to sit at home. The point is no one knows the best answer, but all the options are reasonable as long as you know the risk and rewards of each.

And finally,  if and when you do apply and receive the proceeds from the PPP Loan, we are currently recommending that you open up a separate checking account to track the use of these funds; this will be important from a loan forgiveness basis. The same is true for the EIDL Loans. If you receive the proceeds from an EIDL Loan, please consider opening a spearate checking accout to track such funds.

Allen’s Webinars this week
1) ADA tomorrow at 3 PM
2) Schiff Client Webinar 10 AM on Thursday

3) Madow Brothers, 1 PM Thursday
4) MSDA Webinar, Friday at 10 AM
5) Robert T Freeman Dental Society, Friday at 2 PM

Please stay safe and healthy!

We are here for you!

My best to all